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Subject: Re: OT optimal bidding strategy for ebay style auctions

Author: Michael Yee

Date: 13:54:58 02/02/04

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On February 02, 2004 at 15:15:18, K. Burcham wrote:

>On February 02, 2004 at 15:07:42, Jonas Bylund wrote:
>
>>On February 02, 2004 at 14:17:12, K. Burcham wrote:
>>
>>>
>>>
>>>Are you running a money scam at Ebay Nick Wilson?
>>>If this is going on, then I also assume you would lie about the condition
>>>of the computer.
>>>
>>>The highest bid is posted.
>>>I made a bid.
>>>software said, no good, I have been outbid, need more money.
>>>I raised bid.
>>>software said, no good, I have been outbid, need more money.
>>>I raised bid.
>>>
>>>I repeated this many times.
>>>each time your scam software that you use, is refusing the bid to raise price.
>>>
>>>kburcham
>>
>>LOL this is quite normal, you can enter a max bid say 2000$ if you know that's
>>what you will pay no matter what,
>
>LOL
>Not a good explanation. who would bid 2000 not knowing what the highest bid is?

[snip]

I think Jonas is right--if you have a max "willingness to pay" (WTP) of $2000,
then you could bid $2000 up front and let ebay be your "proxy" bidder. Now
suppose that your $2000 was greater than every other bidder's max WTP (which no
one else knows but ebay). Then you would become the current high bidder (say,
with a visible top bid of $150), and in the future ebay would increase your
"visible" bid enough to keep you as top bidder if anyone else placed bids higher
than $150.

However, it's been proven to be optimal (in ebay style auctions--i.e., with
fixed end time) to keep your max WTP hidden until the last possible moment. So
if you really are willing to pay $2000, you should bid $2000 when there are just
a few seconds left. Not everyone does this, of course, which allows sellers to
sometimes get much more than fair market price (or even the maximum max WTP over
all bidders).

Michael



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